Making mistakes is a part of life. But, most of these innocent inevitable life mistakes usually don’t cost you thousands or even tens of thousands of dollars!
When buyers decide to go at it alone or with an inexperienced real estate agent mistakes are almost certain to happen.
Some of these mistakes are minor, but others can be extremely costly. Not just financially, but emotionally and physically draining. Buying a home is stressful enough, you don’t need to add making mistakes to the mix.
So what are these costly home buyer mistakes that need to be avoided? Here are 9 of the biggest home buying mistakes to avoid…
Top 9 Austin Home Buyer Mistakes
Not Checking Your Credit
One major mistake many first time homebuyers make is not pulling their credit report prior to starting the home buying process. Unless you’re paying all cash for your new home, you need to make sure you’re credit score is the best that it can be when you start the home buying process.
If you plan on obtaining a loan your credit score will play a big role in what loan programs you qualify for.
A mortgage lender is going to scrutinize a prospective buyer’s credit report when determining if they are approved for a loan, if so what loan program, for how much, and what the interest rate will be.
Nowadays, you can track your credit summary, report, and score using many different sources. One of my favorite is to use experian.com and using their paid membership to dispute any discrepancies, using their “Boost” function, and compare your score across the 3 main credit bureaus.
Depending on a few different factors a higher score will save you tens of thousands over the course of your 15 or 30 year loan.
Not Having Financing or Funds in Order
Speaking of loans and doing your credit due diligence.
It’s not uncommon for buyers to want to look at homes and then get pre-approved for a mortgage or move their money around to pay cash.
The mortgage pre-approval or proof of funds should come before looking at homes for several reasons.
Just because a buyer can afford the monthly mortgage payments doesn’t mean they will be approved for a mortgage. And, just because a buyer gets approved for a million dollars doesn’t mean they can afford to spend a million dollars on a home.
In order to submit an offer the buyer will need to know the terms of their financing; what type of loan, how much they’ll be financing, the interest rate, terms of financing, and how long their lender will take to provide loan commitment.
Sellers want to know they have a ready, willing, and able buyer looking at their home, not a looky lou. A lot of sellers jump through hoops to prepare their home for a showing and if they are selling with kids or pets it’s even that much more challenging.
A good listing agent will inform a seller an offer without proof of funds or a mortgage pre-approval is about as good as nothing. In a seller’s market, especially, you want to have your ducks in a row when presenting an offer.
Only Speaking with One Lender
Your lender should be able to go over their financing options and financial obligations that come with it. Both parties need to be available to answer questions, on the phone or in person.
Whether a buyer goes directly to their bank or mortgage broker they should contact at least one other lender or broker. By doing so they’ll be able to compare their financing options, interest rate, and closing costs. Not all lenders charge the same amount. In fact, some lenders may charge thousands of dollars more than their local competition.
There are 10 questions buyers should ask every lender to ensure they are comparing lenders apples to apples. While one may have a lower interest rate they may have outrageous lending fees, in the end costing them more.
Randomly Selecting a Realtor
Purchasing a home is not the same as purchasing a new dress or even a new car. Buying a home is a huge financial commitment, a commitment that most people undertake for 30 years.
You need to have an experienced professional, guiding them through the process. Explaining the home buying process, and answering any questions until they are fully understood from start to finish.
This is especially important if it’s your first time buying a home, but even if a buyer previously purchased a home real estate is constantly changing and they will still need a great team on their side.
Your real estate agent should be able to educate you about the area, market conditions, and explains the terms of an offer.
Using the first Realtor who answers their phone. This is one of the many home buyer mistakes made. Buyers need to work with professionals at the top of their game, who will look out for their best interest.
For example, you made it to my website where I educate, inform, and guide you through different topics in real estate. You’re in good hands here!
Unrealistic Expectations
Ever heard of the phrase “champagne taste on a beer budget?”
This too is one of the many home buyer mistakes made. After all, a buyer will be spending a lot of money and wants the perfect house. Well, unless you are purchasing land or building your dream home you probably won’t find the “perfect home.”
This is another reason why you need to have their finances in order first. Checking out open houses priced well above what you qualify for is setting yourself up for disappointment and unneeded frustration.
Setting realistic expectations is key to finding a house that meets your main wants and needs.
Avoid Spending Large Amounts Of Money When Buying a Home
Many home buyer’s are tempted to start shopping for their new home before they have closed on it.
This is a huge mistake.
Money makes the world go around and spending it can easily blow up a buyer’s financing. Once a buyer applies for a mortgage and gets pre-approved they need to freeze. They shouldn’t change jobs, open up a new credit card, deposit a large sum of money into their bank account, switch banks, or charge up their credit cards.
While it may seem harmless to buy furniture the day before closing it can easily turn an approved mortgage into a rejected one. Lenders will make sure nothing has significantly changed in a buyer’s finances right before closing. So that $3,000 purchase at the furniture store before closing could throw a buyer’s debt to income ratio offer ending in a loan denial.
Draining Savings
Using all of their money for the down payment and closing costs is one of the biggest home buyer mistakes. A buyer should never drain their savings in order to purchase a home. Life happens, things break, jobs are lost, the list of unexpected costly events and repairs can pop up at any time.
In addition to the down payment and closing costs, buyers should have at least 3-6 months of expenses set aside. They should never live above their means or count on getting that huge promotion at work. Robbing Peter to pay Paul is not a cycle new homeowners want to start, it can turn into a slippery downhill slide.
Not Budgeting For Repairs or Renovations
Rarely will you buy a home that doesn’t need some work or repairs. And 99% of the time you’ll want to remodel or renovate something to match your taste.
These changes can be costly and even if you do budget, it’s usually more than what you think.
Whether a home needs to be painted or a bathroom needs to be completely gutted you need to gather numbers first.
Guessing what it will cost to paint a home or replacing the kitchen, is not a good idea. Guessing leads to stressing!
Even if buyers plan on doing the work themselves they still need to gather costs on supplies and include a buffer for unforeseen expenses.
When it comes to getting estimates buyers should obtain estimates from multiple contractors. Then work off the average, not the lowest estimate received. Once again unforeseen problems can pop up adding to the cost.
The renovation or repair process isn’t as cheap, easy, or fast as seen on most home improvement TV shows. It can be a long costly process with a lot of hidden expenses. Therefore, buyers need to do their homework and create a budget.
Develop a plan, budget, extra budget, and try to stick the plan to avoid making costly mistakes.
Underestimating the Cost of Homeownership
Hidden expenses and homeownership can go hand in hand.
Just 3 weeks my parents discovered a cracked pipe underneath one of their bedrooms in a home built in 2003. The cost to repair? A cool $18,000 in a home they’ve only lived in for 4 years.
There are a lot of expenses that come with owning a home besides the mortgage payment. There are property taxes, homeowners insurance, utilities, HOA fees, maintenance fees, such as landscaping, and repair costs. Murphy’s Law often happens after closing on a new home. The water heater was working perfectly fine breaks 3 weeks after closing, cha-ching $3,000 out the window.
This is why it’s important for buyers to factor in the age of the roof, AC, water heater, electrical, plumbing, and appliances when buying a home and plan accordingly. I always recommend my buyers purchase a home warranty.
If the roof is at the end of its life buyers should obtain estimates before moving forward with the purchase. A new roof can easily cost $30,000, is this an expense a new homeowner can afford? If not they should look at homes with newer roofs.
How To Avoid Making Mistakes Buying A Home In Austin
Most home buyer mistakes can be avoided.
Just like mistakes in life, the best way to avoid them is to educate yourself.
When buying a home, the best way to avoid costly mistakes is working with a top Realtor.
They will be able to guide a buyer through the entire process from start to finish. And this is why buyers shouldn’t select a random Realtor or Lender to work with. They need an advisor, someone who can explain things, provide options, and make recommendations.
